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State money transmission laws are very strict, requiring, among other things, a bond to be posted to protect the public.

Accoring to FinCEN, anyone selling units of a decentralised virtual currency to another person for real currency is a money transmitter--so, for example, if you operated a business exchanging U.S. dollars for Bitcoins, you must be licensed. I don't know if the Bitcoin Foundation did this in California; perhaps there is some other wrinkle of state law at play here.

As you might guess, we have deep expertise on-hand for the Foundation as to MTB/MSB laws, and can confidently state we do not engage in MTB or MSB activity at the Bitcoin Foundation; we're just a member organization.

The state of California is blanket C&D-ing all Bitcoin businesses.

Given the online ads included in the letter, it appears they googled for "bitcoin" and used a screen grabber to copy/paste the law text. It's sad how messed up the CA gov't has gotten.

Yes, this seems likely.

I wouldn't be surprised if the C&D were blanket. That said, when you Google for "Bitcoin Foundation" you see an "About" section in the #1 result (your website) which begins, "Our mission is to help people exchange...". I wouldn't put it past the state not to have read any further. ;-)

OK, but isn't it a fact that the Bitcoin Foundation's membership is made up of MTB/MSB firms?


The Bitcoin foundation does neither exchange or trade Bitcoins, nor does it release any Bitcoin client. Its only mission is to "standardize, protect and promote" the use of Bitcoin.

Charging the Bitcoin foundations for violations against the money transmission laws would be like charging NRA for violations against firearm laws. This would be a very alarming precedent and would basically violate your rights for free speech.

The best argument in favor of the C&D I can think of is that the Bitcoin Foundation pays a salary to the lead developer of the reference client and daemon.

If you violate money transmission laws because you pay a salary to someone (without being a licensed money transmitter) there would be lots of people violating those laws in California.

I agree, I'm just speculating on California's justification for the C&D, assuming it isn't simply a result of ignorance of how bitcoin works and the role of the Bitcoin Foundation.

Isn't a simpler explanation that they are just stupid and didn't take 5 minutes to find out exactly who they are sending the letter to and just sent it to the first google result for bitcoin?

That's a two way street. I'm guessing the Bitcoin Foundation might have overlooked some of its due diligence obligations; it looks to me like CA is 'piercing the corporate veil' if you're familiar with that legal term.

Yet the Bitcoin foundation is neither a operator of a virtual currency service or an exchanger according to FinCEN rules.

Tradehill and Coinbase are based out of California and are following all federal and state rules.

Interesting that you say that. Coinbase is verifiably registered with FinCEN, but not the states, as far as I can see. (Square, mentioned in the article, actually is registered in California.)



I thought Coinbase was based out of SF and even backed by YC?

Not sure though, seeing on the privacy page an Oregon address.


If you google that address, it is an old address for earth class mail, a commercial mail scanning/forwarding service. (I use them too; they rock if you move a lot, or live overseas.)

That's okay, but what does that have to do with the Bitcoin Foundation? I hope they take them to Court.

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